Defaulting Payments – Know Your Rights under

Republic Act 6552 (Maceda Law)

Posted by: Joanne Almaden in Real Estate Laws On:June 18, 2016 Last updated: April 1, 2018

Knowing your rights as purchaser of a real estate property under

the Maceda Law, will mean a huge difference. It can mean losing
everything you have put in for your investment, or getting at least
50% of it back, when for some reason on your part, you cannot
continue with your installment purchase. So in this post, we will
discuss the most important points in the Maceda Law that are
relevant to a distressed real estate buyer.

WHAT IS THE MACEDA LAW?

The Maceda Law, also known as The Realty Installment Buyer

Act or Republic Act 6552 is the law that lays out a defaulting
buyer’s rights in the Philippines with regards to his purchase of a
real estate property, whether it’s a condominium unit or a house-
and-lot unit in a subdivision development. This was initiated by
lawmaker Ernesto Maceda and has taken into effect on August 26,
1972.

WHO IT APPLIES TO

Today, more and more people in the working class, especially

OFW’s are buying condominiumsor house-and-lots in subdivision
projects. But paying them in full in just one payment is just too
much.

So practically, they opt to pay the equity by installment since

developers’ or contractors’ installment equity payment schemes
have become increasingly affordable. This is through stretching
their equity payment or down payment stage to 20, 30, 40 months
or sometimes even longer. Then they just take out a loan from their
bank for the remaining balance since banks usually have lower
interest rates compared to in-house financing.

If you have taken advantage of this convenience in acquiring your

property, everything is okay as long as you can keep up with your
payments. But times are not always good. There are times when
we face difficult situations and times when we just can’t make the
payments anymore.
If you come into this situation, the Maceda Law was passed to help
protect you. It established the rights of a qualified buyer who can’t
continue with his payments anymore.

Under the Maceda Law, there are two qualification categories of

buyers accorded protection. These buyers are:

1. Under Section 3 of Maceda Law, a buyer with at least 2 years of

installments

2. Under Section 4 of Maceda Law, a buyer with less than 2 years of

installments

RIGHTS OF A BUYER

Section 3

…where the buyer has paid at least two years of installments, the buyer is
entitled to the following rights in case he defaults in the payment of
succeeding installments:

a. To pay, without additional interest, the unpaid installment due within

the total grace period earned by him, which is hereby fixed at the rate of one
month grace period for every one year of installment payments made;
provided that this right shall be exercised by the buyer only once in every
five years of the life of the contract and its extensions, if any.

b. If the contract is cancelled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty
percent of the total payments made… Down payments, deposits or
options on the contract shall be included in the computation of the
total number of installment payments made
Section 4

In case where less than two years of installments were paid, the seller shall
give the buyer a grace period of not less than sixty days from the date the
installment became due.

If the buyer fails to pay the installments due at the expiration of the grace
period, the seller may cancel the contract after 30 days from the receipt by
the buyer of the notice of cancellation or the demand for rescission of the
contract by a notarial act.

In other words, Section 3 of Maceda Law indicates that the buyer

has a right to a refund and grace periods as long as the buyer has
paid at least two years. However, if there’s still less than 2 years of
installment payments made, the buyer is only entitled to 60 days
grace period as indicated in Section 4.

More importantly, there is a section in the Maceda Law that

protects the buyers from the fine prints of contracts imposed by the
contractors or developers. These fines prints are oftentimes
neglected by the buyers to review during the contract signing.

Section 7 of the Maceda Law states that:

…Any stipulation in any contract hereafter entered into contrary to the

provisions of Sections 3,4,5, and 6 shall be null and void.

This section emphasizes the overriding power of the Maceda Law

against the contract made by the developer and the buyer.

FREQUENTLY ASKED QUESTIONS

The following questions have been commonly asked by our

readers:

 Does it apply when I’ve been paying to the bank already?

 A common practice today is for the developers to require only the
equity to be paid in installments. This equity or also called ―down
payment‖, varies from 10% to 50% (usually 20%), depending on the
developer or the particular development project. The remaining balance
after the equity, will be shouldered by some financing scheme.

This financing scheme may be provided by:

o Banks

o HDMF (formerly PAG-IBIG)

o ―In-house Financing‖, by the developer themselves

o or other financing institutions

If you opt to pay your remaining balance using bank financing, that
means you’ll be taking a housing loan from the bank.

When you start paying to the bank, that means you’ve already taken
out your housing loan from them. When you took a loan from your
bank, you basically borrowed money and then you used that money to
pay the developer in full. But this all happened in the background and
the money did not go through your hands anymore. The bank gave it
straight to the developer. And this is what commonly confuses people.

So now, your property has been fully paid as far as the developer/seller
is concerned. In fact, as far as the law is concerned, your property has
been fully paid already. But your loan from the bank is what’s
outstanding. Your debt is now to the bank — the money you borrowed,
to pay the developer.

So the answer to the question on whether this Maceda Law will still
apply, is no, it will not apply anymore. That’s because the property is
technically, already paid in full.

 Does it apply when I’ve been paying to PAG-IBIG already?

Please refer to the answer to the preceding question above.

 My developer/seller is very slow or is already late in delivering the

property, will Maceda Law apply if I back out from the purchase?

You check first when the developer is supposed to deliver the property
to you — their supposed ―deadline‖. You may check your contract. Or
 you may also call your nearest HLURB office and check with them
when is the deadline given to the developer, as indicated in
their License to Sell for the specific project where your property is in.

After determining that your developer is at fault, you may file a

complaint for recision of your contract and for total refunds plus
damages, as appropriate, at HLURB.

But as far as Maceda Law is concerned, it is not the appropriate law to

rely on, now. Read carefully the provisions of P.D. 957. This is what
applies in cases like this.

 My developer is for some reason, the one who’s at fault and I want
to back out. Will Maceda Law apply?

The Maceda Law only assures 50% refund on all the payments you’ve
made (or a little more as appropriate). If your developer is at fault, you
should not ask for only 50% refund but for the entire amount you’ve
already paid. You can even demand for damages as you deem fit.

If your developer is at fault, the provisions of P.D. 957 may apply;

and/or the appropriate provisions of Book IV of the New Civil Code on
Obligations and Contracts.